Releasing the cash tied up in your sales ledger, so growth stops consuming working capital.
Indicative terms
- Facilities from around £50,000 to several million pounds, depending on funder and ledger size
- Advance rates commonly around 80% to 90% of invoice value, and higher with some funders
- Funds typically released within a day of invoicing once a facility is running
- Setup often within one to two weeks on a straightforward case
- Confidential or disclosed, with optional bad debt protection
For how invoice finance works in general, see our invoice finance guide.
Confidential or disclosed
Confidential invoice discounting means your customers are not normally told. You continue to invoice and collect as now, and the funding sits in the background. Many established wholesalers prefer this.
Factoring is disclosed, and the funder handles collections. That is sometimes seen as a negative, but for a growing distributor without a credit control function it can be a genuine benefit: you get an outsourced collections team alongside the funding.
Which is right depends on the size of your business and whether credit control is something you want to own or outsource.
Concentration is a common reason deals get declined
This is one of the most important things to understand about funding a medical distributor.
Most invoice financiers cap how much of your ledger can sit with one customer, commonly somewhere between a quarter and a third. Exceed it and the excess may go unfunded, or the facility may be declined.
Medical and pharmaceutical distribution is structurally concentrated. If you supply two large hospital groups, a handful of pharmacy multiples or a single NHS framework, you may well fail a standard concentration test. That is not a reflection on your business; it is a mismatch between your ledger shape and a generic credit policy.
Some funders will go well beyond standard concentration limits or assess concentration case by case, and there are ways to structure around it: sub-limits agreed on named debtors, credit insurance, or splitting the ledger. Knowing which funders take which approach is much of the value in placing this kind of facility.
Public sector debtors
NHS trusts, health boards and local authorities are strong covenants but can be slow payers with complex approval chains. Funders differ widely in their appetite for them.
Some treat public sector debt as a strong covenant and are comfortable funding it. Others dislike the approval process and the disputes that can arise over delivery documentation. It is worth establishing which you are dealing with before submitting.
What funders assess
- The quality and spread of your debtor book: who your customers are and how concentrated the ledger is
- Payment history and average debtor days
- Your credit control process and how disputes are handled
- Whether invoicing is against clean delivery documentation or against applications and frameworks
- Your own financial position, though usually less heavily than a term lender would
- Any existing charges over the book
Invoice finance funds what you have already sold. If the pressure point is buying stock or paying overseas suppliers before goods arrive, look at stock finance or trade finance, which can sit alongside an invoice facility.
Common questions
Will my customers know?
Not normally with confidential invoice discounting. You invoice and collect as usual and the arrangement stays between you and the funder.
Can I fund only some invoices?
Yes. Selective and single-invoice facilities exist, which can suit a one-off large order rather than committing the whole ledger.
What if one customer is most of my turnover?
That kind of ledger often struggles with a generalist funder and can work with a specialist. Some funders take a much more flexible view of concentration. Tell us the ledger shape early and we will approach the ones most likely to fit.
Does holding a wholesale distribution licence affect it?
Funders will want to see the licensing your business needs, such as an MHRA wholesale dealer’s licence where one is required, in good order. It rarely causes difficulty where the paperwork is current.
For the wider picture on funding distributors, return to medical wholesaler finance, or see our general guide to working capital.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.